Engineering giant Larsen & Toubro Limited (L&T) has entered into an agreement with a wholly-owned subsidiary of Canada Pension Plan Investment Board (CPPIB), under which the CPP Investment Board Singaporean Holdings 1 (CPPIBSH) will initially invest Rs1,000 crore in its subsidiary L&T Infrastructure Development Projects Limited (L&T IDPL).
L&T said the Canadian fund would follow this up with a second tranche of Rs1,000 crore, or a higher investment as may be agreed between them, after 12 months from the date of the initial investment, subject to any required regulatory approvals at such time.
''CPPIBSH will invest in preference shares of L&T IDPL, compulsorily convertible into equity shares by 2018 at a valuation to be determined as per a mutually agreed process, L&T said, adding, ''Post conversion, CPPIBSH will hold a minority stake in the equity capital of L&T IDPL.''
This would be the first direct private investment by a Canadian pension fund into an Indian infrastructure development company, R Shankar Raman, chief financial officer and member of the board of L&T, said.
''We are pleased to form this new partnership with CPPIB. With its long term view, CPPIB would be an ideal partner for L&T and will provide growth capital to L&T IDPL to expand its infrastructure development business,'' he said.
''This transaction represents CPPIB's first investment in India's infrastructure sector with a highly reputable partner and fits well with our strategy for India as a key long-term growth market. We look forward to partnering with L&T and L&T IDPL's experienced management teams as we build our infrastructure platform in India over the long term,'' André Bourbonnais, senior vice president (private investments), CPPIB, said.
The completion of the transaction and receipt of funds, however, is subject to fulfillment of customary closing conditions and procuring necessary approvals from relevant government authorities and regulators, L&T said in a web site release.
L&T Infrastructure Development Projects Limited (L&T IDPL), a subsidiary of the $14.3-billion technology, engineering, construction, manufacturing and financial services conglomerate Larsen & Toubro (L&T), is a pioneer of the public-private-partnership model of development in India.
L&T IDPL has business interests in the development of roads and bridges, ports, metro rail, power transmission lines, wind energy and emerging sectors such as water and railways and handles a portfolio of infrastructure assets with estimated project cost of $7.5 billion comprising of 23 projects across sectors.
Its products and systems are marketed in over 30 countries worldwide.